Chapter 2
Strategic Importance of Understanding the External and Organizational Environments (pgs 36-39) Over time, HR practices give rise to organization's culture (personality), traditions (history), and rules & regulations (a set of values) *''Exhibit 2.1: Corporate Leader's Views of Human Capital (pg 36)'' Elements of the Environment *External Environment - encompasses local, national, and multinational conditions that confront an organization **Economic Globalization **Political Landscape **Industry Dynamics **Labor Markets **Country Cultures **Legal Institutions (Chapter 4) **Unions (Chapter 14) *Organizational Environment - conditions within the organization itself. **Technology **Company Culture **Business Strategy HR Triad Line managers: investigate potential new markets; develop understanding of selected countries; investigate new technologies; understand and communicate vision/mission/values; recognize and promote company's desired culture; assist HR professionals in setting company culture to implement strategies. HR Professionals: investigate foreign labor markets qualifications and conditions; educate org in issues of global expansion; provide resources for managers/employees to learn about cultural differences; apply HRIM for competitive advantage; align HRM system with vision, mission, values; develop HR policies to create desired company culture; with line managers develop company culture to implement strategies. Employees: Develop understanding of effect of global conditions con company, other cultures, and unique aspects of own culture; continuously develop skills needed to use new technologies; contribute to the mission; behave consistently with the values; understand company culture; learn behaviors and skills needed to implement firm's strategies; assist other employees with needed behaviors and skills. Economic Globalization (pgs 39-42) Many foreign firms are expanding into the US *US market very open compared to other top markets. *Has put intense pressure on domestic companies to compete Competing on Cost versus Competing on Knowledge *Some US manufacturers are diversifying products & services so as to compete in industries where cost pressures are less severe. *Do so by leveraging accumulated knowledge in a field to move into a new industry Worldwide operations *American firms are expanding into global market. Regional trade zones *Allows smaller countries to benefit from economies of scale in consumer markets and gain easier access to large labor pool. *NAFTA - has lead to removal of nearly all tariffs between Canada, US, and Mexico **Maquiladoras - factors set up along US-Mexico border, using low-skilled, low-paying labor. *CAFTA - Central American Free Trade Agreement, between the US, El Salvador, Guatemala, Honduras, Nicaragua, and Costa Rica. *EU - "An institutional framework for the construction of a united Europe." **27 countries **Creates single market through removal of trade barriers **Single currency removes conversion costs and increases economic stability **Removed some border restrictions **Numerous directives relevant to employment *ASEAN - Association of Southeast Asian Nations; *APEC - Asian-Pacific Economic Cooperation **21 member countries, including US, Japan and China Political Landscape (pgs 42-43) NGOs - international Non-Governmental Organizations ILO - International Labor Organization *Housed within the U.N. *Mandate: promote social justice and internationally recognized human and labor rights *Formulates international labor standards SAI - Social Accountability International *Promotes socially responsible approaches to conducting business *SA 8000 - Social Accountability 8000 **Certification process **Companies must satisfy standards in child labor, forced labor, health and safety, collective bargaining, discrimination, disciplinary action, working hours, and compensation. WTO - World Trade Organization *Founded in 1995 *Almost 150 member countries *Only global body able to enforce its decisions though its own court *Promotes global harmonization of trade agreements Industry Dynamics (pgs 43-46) Companies in the same industry typically experience similar patterns of growth and common industry culture. Industry Life Cycles - A series of stages that create certain similarities in the issues that industry members face and the solutions they adopt. *Nascent **Firms are competing to establish a distinctive reputation and to create customer loyalty. *Rapid Growth **Acquiring new talent and retaining employees more central. Job hopping becomes more common. *Mature **A few large firms all strive to increase efficiency while improving the quality of their products. **Common to shrink size of firm’s core workforce and use contingent workers **''Exhibit 2.2: Contingent Workers in the US Workforce (pg 44)'' *Decline and Renewal **Products and services of industry become obsolete **Repeated downsizing and businesses closing **Long-time industry employees face long-term unemployment due to obsolete skills Mergers and Acquisitions (M&A) *Occur when firms seek to be fast growing, efficient, profitable, flexible, adaptable and future-ready. *In computer and biotech, major objective of M&A is to gain access to skills and talents of people employed by another company. *Objectives of M&As: **Increase market share **Increase geographic reach **Fill out product lines **Respond to new deregulation *Types: **Merger **Acquisition **Takeover *HR stages of M&A (Exhibit 2.3, pg 45) **Precombination **Combination **Solidification and Assessment (AKA Vertical Integration) *Reasons for M&A failures **Most M&A in US fail to achieve financial objectives **Many fail due to culture clashes, incompatibility, and loss of key talent. Labor Markets (pgs 46-50) US Labor Market *Slow Growth **Impending retirement of the baby boomers **US colleges will graduate only 198,000 students to fill the shoes of 2 million Baby Boomers scheduled to retire each year through 2018. **Women fueled previous grow, now most are working. *Skills Shortage **Especially for high-tech, computer-related, and "new economy" jobs **Expected shortage of Project Engineers for construction industry **Demographics of workforce likely to change **Firms are attempting to keep employees on the job past retirement age. *Competition for Employees *Immigrants **Constituted almost half of recent net labor force increases Global Labor Market *Expected to increase in developing countries and decrease in developed. *Labor Costs **''Exhibit 2.5: Hourly Compensation Costs by country (pg 49)'' *Where the Skills Are **Lack of skilled labor in domestic US market **50% of Chinese college students major in engineering compared to 5% in US. **~50% of college students are in developing countries. **''Exhibit 2.6: Sampling of Test Scores for 8th Graders Around the World (pg 50)'' *Health Issues **Increased medical costs in developing countries due to HIV/AIDS Country Culture (pgs 50-53) Cultural Differences *How companies are managed. *How work is designed. *How employees expect to be treated. *How managers manage (styles). Dimensions of Country Culture *GLOBE Dimensions (Global Leadership and Organizational Behavior Effectiveness) Consequences of Country Culture - The need for HR practices to be congruent with the country culture to enable global success. *Use of incentives *Attitudes towards work *Empowerment **In the US, Mexico and Poland, employees respond well to being empowered **In India, empowerment is viewed negatively and with confusion Technologies (pgs 53-56) The process of making and using tools & equipment plus the knowledge used in the process. Factories and Mass Production Technologies *Introduced standardized procedures, routine and depersonalized work *Created the need for skilled workers and managers Computer technologies *Increased productivity *Customized products *Empowered workforce Virtual Workforce *Employees work anytime and anywhere, often on an as-needed basis. *Benefits **Telecommuting can reduce real estate expenses **Increase empowerment *Challenges **Employees may feel isolated from employer and/or co-workers **If highly monitored, may become demoralized **Possible misunderstandings in electronic interactions **Possible productivity issues Human Resources Information Management (HRIM) *Management tool that tracks of employees, provides HR support, and facilitates HR planning Company Culture (pgs 56-60) Company Culture Defined *The unique pattern of shared assumptions, values, and norms that shape the socialization activities, language, symbols, and ceremonies of people in the organization. *Assumptions, values, and norms that form the base of a culture can only be inferred from a culture’s more visible elements—its socialization activities, language, symbols, and ceremonies. Leadership *Creating its vision *Defining its mission *Upholding its values Vision *Top management's view of the kind of company it is trying to create. Mission *Defines a company's business and provides a clear view of what the company is trying to accomplish. *Provides more guidance for developing plans to implement the vision Values *The strong enduring beliefs and tenets that the company holds dear and that help to define the company and differentiate it from other companies. *state how employees are expected to behave Company Subcultures *Exists when assumptions, values, and norms are shared by some - but not all - organizational members. **Includes geographic region, business units, M&A organizations, and demographic groups. *Benefits **Diversity *Challenges **Difficulty for M&A targets to acquire new culture **Demographic minority may feel that their subculture is not valued as highly *''Exhibit 2.9: Generations Present in the US Workforce (pg 59)'' Business Strategies (pgs 60-63) A set of integrated and coordinated commitments and actions intended to achieve stated business goals. *Acts as guide *Most closely linked to the nature of company's business. Types: *Total Quality **TQM **ISO 9000 **Six Sigma *Low Cost **Low Cost Leader (EG Wal-Mart) *Customer Service **Can differentiate from competitors by offering higher quality customer service *Innovation **Often need highly educated employees from specific fields Current Issues (pgs 63-65) Aging Workforce *Responses to expected labor shortages: **Making it more attractive for employees to not retire. **Reducing the turnover rates of all employees. **Outsourcing some work. **Offshoring some work. **Encouraging more immigration of skilled workers. **Increasing the use of technology and automation. **Seeking greater involvement in educational programs to help prepare younger workers. Chapter 1 Chapter 3